Archive for October, 2014

Recently, a nurse who was exposed to Ebola in West Africa was involuntarily quarantined in a New Jersey hospital. She was then released back to her home in Maine. Although she tested negative for Ebola and displays no symptoms, Maine officials want her to remain quarantined in her home until the 21-day incubation period has passed. Similarly, in Georgia, people who have had contact with an Ebola patient are required to undergo quarantine, even if they show no symptoms. Although quarantine of people exposed to Ebola may provide relief to millions of Americans who are fearful of an unstoppable outbreak, it raises concerns of whether American citizens—especially those who are asymptomatic—can be involuntarily deprived of their liberty.

The federal government, through the CDC, has broad statutory authority to quarantine persons suspected of carrying communicable diseases if they travel inter-state or arrive in the United State from abroad. Likewise, every state has the power to protect the health, safety, and welfare of people within its borders. For example, in Georgia, the government has the authority to isolate persons with communicable diseases likely to endanger the health of others. It may require quarantine of persons who are simply exposed to or suspected of being infected with infectious disease until they are found to be free of the disease.

These laws provide governments with broad discretion to impose involuntary quarantines. However, quarantined individuals are not left without a remedy. They may, in Georgia for example, challenge the quarantine order before a judge who may either uphold or suspend the order. Either party may appeal the order to the Georgia Supreme Court. This process illustrates the delicate balance between the government’s interest in protecting its citizens from deadly disease and individuals’ interest in preserving their rights.

The scenario is common: an employer wants to avoid issues with clocking in and out of lunch every day, so employees are told to take a one hour lunch and the hour automatically is deducted from their time worked. Of course, the employees are told to inform their supervisor if they work through lunch so that the automatic deduction is reversed. Believe it or not, this simple system has had plaintiff’s attorney’s salivating at the opportunity for collective action lawsuits against employers.

There is a new trend in federal courts, however, that may stop the influx of these collective action claims, or at least slow them down. In Jarosz v. St. Mary Medical Center (E.D. Pa. Sept. 22, 2014), the court recognized that collective actions based upon FLSA violations allegedly arising from auto deducting time for lunch are fraught with factual specific inquiries, and as a result, the court de-certified a collective action. This is one of several courts that has come to the same conclusion over the last few months. The trend of these courts is a positive sign for employers, recognizing that employees who report their time worked to supervisors in different ways and who were supervised by different people simply cannot proceed together in a collective action to allege FLSA violations from an auto-deduction policy.

Ultimately, this case and the growing trend of cases, shows that courts are likely to rule that an auto-deduction policy, standing alone, is insufficient to support a proposed collective action under the FLSA.

One of the newest and most quickly developing areas of tort liability is regarding torts committed over the internet. The most common “traditional” tort that occurs (or is alleged to have occurred) when it comes to social media posting is for defamation. A recent case is Georgia has just affirmed the potential for parental liability for the posts made by their children in this “wild west” frontier of internet tort liability.

In Boston v. Athearn, 2014 WL 5068649 (Georgia Ct. of App. Case No. A14A0971, decided October 10, 2014), the Georgia Court of Appeals reversed (in part) a trial court decision granting summary judgment to the defendants and sending the case back for trial. In Boston, Alexandria (“Alex”) Boston, through her parents, brought suit against Dustin Athearn, his parents, and other defendants when, posing as Alex, Dustin created a Facebook account and profile and posted photographs and statements in that forum that constituted libel under Georgia law. In a nutshell, Dustin and a female friend of his used the Athearn family computer to create the account and made posts that indicated racist viewpoints and a homosexual orientation. Dustin and the friend also sent out “friend” requests to many of Alex’s classmates, teachers, and extended family members. Within a day or two, the account was connected as Facebook “friends” with over 70 people. Dustin and the friend continued to add information and posted status updates and comments on other users’ pages that were graphically sexual, racist, or otherwise offensive; with some falsely stating that Alex was on a medical regimen for mental health and that she took illegal drugs.

When Dustin’s parents were informed (after the truth was discovered at school), they disciplined Dustin and forbid him for one week from seeing his friends after school. Critically, the unauthorized page, however remained accessible on Facebook for an additional 11 months and was eventually deactivated by Facebook officials approximately 2 weeks after the lawsuit was filed. During the 11 months the unauthorized profile and page could be viewed, the Athearns made no attempt to view the unauthorized page, and they took no action to determine the content of the false, profane, and ethnically offensive information that Dustin was charged with electronically distributing. They did not attempt to learn to whom Dustin had distributed the false and offensive information or whether the distribution was ongoing. They did not tell Dustin to delete the page, they made no attempt to determine whether the false and offensive information Dustin was charged with distributing could be corrected, deleted, or retracted.

In reversing the grant of summary judgment to Dustin’s parents, the appellate court found that there were questions of fact to be resolved by a jury whether Dustin’s parents were “negligent in failing to compel Dustin to remove the Facebook page once they were notified of its existence.” This theory of liability was not grounded in vicarious liability, but rather direct liability – whether Dustin’s parents were, themselves, negligent in failing to supervise and control their child with regard to conduct which posed an unreasonable risk of harming others. The court grounded the potential liability not in the parents’ allowing Dustin original access to the internet, but rather, because they continued to be responsible for supervising Dustin’s use of the computer and Internet after learning that he had created the unauthorized Facebook profile.

This case opens a very potentially slippery slope to parents and what they might be held legally responsible for once they learn of the harm their child is causing on the internet. The message is clear – once parents know their child has done harm with digital weapons, it is incumbent upon the parents to end the harm or potentially face ultimate liability for failing to do so. We will continue to watch this case and see if, after trial, liability is ultimately laid at the feet of the parents.

As we previously reported here, the United States Supreme Court is hearing a case regarding whether employees who work at an Amazon.com warehouse should be compensated for the time they spend waiting in a security line. Last week, the Supreme Court held oral argument on this intriguing case which asks when a workday starts.

Arguing on behalf of Integrity and (surprisingly) alongside the Department of Labor, Attorney Paul Clement submitted that going through security at the end of the work day is not “indispensable” to a warehouse. In contrast to the sharpening of knives at a butcher’s shop, Mr. Clement argued that screening is merely “part of the egress process” and something that a warehouse facility could do without. As such, he argued that the security line is more analogous to clocking out, which is a “quintessential postliminary activity under the Portal-to-Portal Act” and thus not compensable.

Counsel for Respondent, Attorney Mark Thierman, focused on whether the security screening constitutes a “principal activity.” Mr. Thierman rejected Justice Antonin Scalia’s suggestion that a principal activity must be a standalone job, arguing that “the concept that it has to be a job in and of itself . . . is wrong.” In support of his argument, Mr. Thierman noted that, while employees are compensated for time spent receiving instructions, there is no such thing as a professional instruction receiver.

The direction the Court takes in this case will be of huge import to employers, especially those requiring security screenings. We will keep you updated on the decision, which likely will be rendered in 2015.

On September 30, 2014, FINRA issued NTM 14-37 which updated FINRA’s December 2013 proposal (see NTM 13-42 )to develop the Comprehensive Automated Risk Data System (CARDS). FINRA proposes to compile a database that tracks every security transaction undertaken within the United States. It will take years to obtain regulatory approval and implement the CARDS program, but upon completion it will rival what the National Security Administration (NSA) purportedly is doing with analyzing email communications. By requiring all carrying and clearing firms to periodically submit, in an automated and standardized format, data relating to the securities and account transactions, holdings, account profile information (excluding personal identifying information) and securities reference data for every securities transaction undertaken by every broker-dealer in the United States, FINRA apparently believes CARDS will ultimately permit FINRA to more systematically monitor securities transactions, enhance FINRA’s oversight role and advance investor protection. The goal is to apply advanced surveillance analytics across the wide expanse of securities transactions and facilitate earlier, and arguably more effective, intervention to protect investors. As a carrot to help get industry buy-in for CARDS, FINRA even proposes to “share” at least some of these advanced analytics with member firms to enhance supervision and compliance before the regulator feels compelled to intervene and the Firm’s liability costs increase.

CARDS, however, presents a number of problems. Indeed, the initial proposal resulted in more than 800 comment letters from across the industry. Cyber security is at the top of the list of concerns for those commenting on the proposal. The ability of FINRA to protect CARDS and the massive amount of customer data that will be funneling through the system remains subject to much debate. It should be clear to everyone that a comprehensive database of the nature proposed by FINRA is certain to draw the attention of those countries intent on spying on and/or attacking the U.S. (Russia, China, North Korea, etc.), cyber-terrorists and plain old-fashion thieves. What is not clear is who will answer to the customers – FINRA or the broker-dealers – when the inevitable security breach occurs. A second major concern is the uncertain, but likely substantial costs, the 4,100 member firms will incur to both standardize and submit data for use in CARDS.

Yet, the most valuable of CARDS’ purported benefits will be deferred until some uncertain date in the future, and only after a second round of un-quantified costs have been incurred. CARDS will not, as presently contemplated for its initial stages, be collecting data on the products that FINRA considers the highest risk to retail investors and in the most need of enhanced surveillance and enforcement activity. Data regarding variable annuities, private placements, direct participation programs, PIPES, non-exchanged traded REITS, unregistered securities, precious metals and direct mutual fund transactions will not be collected in Phase 1 or 2 of CARDS implementation. Rather, given the substantial complexities and costs associated with attempting to gather data on these products, FINRA proposes to defer consideration of the who, what, when and where of how CARDS could ever effectively and efficiently aggregate the data that FINRA most needs to some date several years in the future and after substantial investment has already been made into CARDS. Thus, CARDS will create substantial immediate costs, but without substantial, immediate benefits to consumer protection.

NTM 14-37 requests further industry commentary regarding the revised CARDS proposal. The comment period is set to expire on December 1, 2014. And FINRA has been talking directly to clearing firms and industry participants to try to refine its proposal. Leading industry groups, such as the Financial Services Institute (FSI), are attempting to work with FINRA to more fully shape the CARDS concept. Once a final proposal for CARDS is prepared, FINRA will need to submit CARDS to the Securities and Exchange Commission for approval before FINRA can implement it.